The End of the DRAM Era – Flash Spending Surpasses DRAM

The semiconductor memory industry has a long history of fluctuating market cycles. The DRAM sector in particular has gone through a few bad cycles and witnessed quite a few consolidations in the past ten years or so. However, DRAM continues to be one of the most important and capital intensive sectors in the semiconductor industry. According to the SEMI World Fab Database, in the years from 2004 to 2006, DRAM alone accounted for almost 30% of overall semiconductor capital equipment spending. That percentage went even higher in 2007— to 35%— to about $13.5 billion spent.

A combination of market driven factors suggest the end of a DRAM-driven memory industry. The DRAM sector has been suffering from fast price erosion, fierce competition and mediocre demand since the recent glory days of 2007. Is it time to call an end to the era of DRAM-driven memory industry? Without major product differentiators, DRAM manufacturers are forced to focus efforts on continuous cost reduction by node shrinks and capacity expansions. Additionally, the PC-centric DRAM market is currently facing structural challenges from stagnant content per box growth and PC replacement by mobile devices.

While Memory manufacturers navigate constant change, they are also gearing up for more NAND flash investment. According to the SEMI World Fab Forecast, NAND flash investment has been below DRAM levels during the past few years. With strong demand from smart phones and tablets, NAND flash equipment spending is expected to grow from $4.2 billion in 2010 to $7.2 billion this year, surpassing DRAM spending for the first time. Even with a potentially slower market ahead, NAND flash spending could reach $7.6 billion next year.

Equipment Spending of Memory Fabs by Segments

(US$ Million)

2007

2008

2009

2010

2011

2012

Memory/DRAM

13,480

6,645

2,535

6,645

4,285

4,355

Memory/DRAM&Flash*

2,325

1,835

785

2,375

2,565

2,965

Memory/Flash

6,730

5,981

1,605

4,275

7,215

7,660

Memory/Other

125

80

10

0

0

0

Total

22,660

14,541

4,935

13,295

14,065

14,980

*Memory/DRAM&Flash refers to fabs that make both DRAM and Flash products.

Source: SEMI World Fab Database Reports (Sept. 2011)

NAND flash capacity is expected to jump 23% this year from 0.80 million wafers per month (300mm-equivalent) in 2010 to almost 1.0 million in 2011 mainly due to capacity ramp ups from Samsung, Toshiba, IM Flash and Hynix. In 2012, overall NAND flash capacity is forecasted to grow another 15% which shall exceed overall DRAM capacity to reach 1.15 million wafers per month (300mm-equivalent). During this time, DRAM capacity will remain pretty much flat throughout 2012.

Capacity of Memory Fabs by Segments

*Memory/DRAM&Flash refers to fabs that make both DRAM and Flash products.

Source: SEMI World Fab Database Reports (Sept. 2011)

SEMI still expects the DRAM industry to continue its investments in node shrinks and diversification into specialty DRAM markets. Even without adding new capacity, the DRAM industry could easily spend around $4 to $5 billion each year on technology upgrades. Investments in NAND flash will further intensify with the adoption of sub-2x nodes while new fabs and new capacity will come online over the next few years.

SEMI’s Worldwide Dedicated Team

Since the last fab database publication in May 2011, SEMI’s worldwide dedicated analysis team has made over 330 updates on more than 250 fab facilities in the database. Fifteen new facilities have been added to the database, 10 of these LED fabs. The latest edition of the World Fab Forecast (published August 30, 2011), lists over 1,100 facilities, with more than 65 facilities starting volume production beginning next year and into the future.

The SEMI World Fab Forecast uses a bottom-up approach methodology, providing high-level summaries and graphs; and in-depth analyses of capital expenditures, capacities, technology and products by fab. Additionally, the database provides forecasts for the next 18 months by quarter. These tools are invaluable for understanding how the semiconductor manufacturing will look in 2011, 2012 and 2013, and learning more about capex for construction projects, fab equipping, technology levels, and products.

SEMI’s Worldwide Semiconductor Equipment Market Subscription (WWSEMS) data tracks only new equipment for fabs and test and assembly and packaging houses. The SEMI World Fab Forecast and its related Fab Database reports track any equipment needed to ramp fabs, upgrade technology nodes, and expand or change wafer size, including new equipment, used equipment, or in-house equipment.